A Primer for CPAs

on Greenhouse
Gas Emissions
Management Systems
AUGUST 2018
A Primer for CPAs
on Greenhouse
Gas Emissions
Management Systems
AUGUST 2018
 DISCLAIMER
This paper was prepared by the Chartered Professional Accountants of Canada
(CPA Canada) as non-authoritative guidance.
CPA Canada and the authors do not accept any responsibility or liability that might
occur directly or indirectly as a consequence of the use, application or reliance on
this material.

© 2018 Chartered Professional Accountants of Canada

All rights reserved. This publication is protected by copyright and written permission is required
to reproduce, store in a retrieval system or transmit in any form or by any means (electronic,
mechanical, photocopying, recording, or otherwise).
For information regarding permission, please contact permissions@cpacanada.ca
 iii

Table of Contents

Executive Summary 1

Section 1: Overview of Climate Change Mitigation 3

Intended Audience and Scope 3

What Is Climate Change? 4

Government Responses 4

Section 2: The Need for GHG Emissions Management 11

Different Types of Greenhouse Gases 11

GHG Emissions Management Systems 12

Overview of GHG Reporting Frameworks 13

Key Components of a GHG Emissions Management System 14

Section 3: Roles for CPAs 17

Roles for CPAs in Leadership Positions 19

Roles for CPAs at All Levels 20

Conclusion 23

Appendix A — Where to Find More Information 25

 1

Executive Summary

This paper addresses the need to reduce and manage greenhouse gas (GHG)
emissions. Achieving global targets envisioned in the Paris Agreement will require
a cultural shift and the harnessing of markets, innovation and technology.

This publication identifies various government responses to address global

climate change ranging from international agreements to national and provin-
cial action plans. These action plans require many companies to submit GHG
emissions reports on an annual basis. In Canada, GHG emissions reporting is
complex because the requirements differ across jurisdictions. Therefore, it is
important to understand the regulatory reporting requirements in the jurisdic-
tions where companies have operations.

In particular, the federal government and various provincial governments have

put a price on carbon. This has strategic operational and financial implications
for entities.

Not only are regulatory reporting requirements in Canada complex, so too is

the measuring of GHGs. There are seven types of GHGs generally included in
regulatory reporting requirements. Some GHGs are more potent and short-lived
in the atmosphere, while others are less potent but remain in the atmosphere
for a longer period.

A GHG emissions management system consists of a set of processes and tools

designed and developed by organizations and tailored to their need to under-
stand, quantify, monitor, report and verify GHG emissions. Two of the most
commonly used frameworks for GHG emissions reporting are ISO 14064 and
the GHG Protocol.
2 A Primer for CPAs on Greenhouse Gas Emissions Management Systems

Chartered Professional Accountants (CPAs) have a crucial role to play in

supporting their organization’s GHG emissions management activities. This
publication presents:
• an overview of climate change developments and mitigation efforts
in Canada and globally
• existing federal and provincial carbon pricing and GHG emissions
reporting requirements
• key components of a GHG emissions management system
• questions for companies to address when establishing such a system
for their organization

1. What are the relevant regulatory requirements for GHG emissions

reporting?
2. Is participation in a GHG emissions reporting program mandatory
or voluntary?
3. Which GHG emissions reporting framework is applicable?
4. Is third-party verification required for GHG emissions reports?
5. What types of GHG emission are relevant for my industry and/or
business?
6. What is the appropriate scope and boundaries for GHG emissions
reporting?
7. Will the organization set targets for GHG emissions reductions?
8. What is the organization’s strategy for managing GHG emissions?
9. What is the role of leadership in GHG emissions management?
10. Is external disclosure to capital providers necessary?

Additional resources are provided in Appendix A.

We believe that increased attention will be placed on emissions management

and reporting as various regulators and stakeholders push for change. We
encourage management to closely monitor developments and also contact us
with any feedback or insights that could help us in the development of future
publications on this topic.

Sarah Keyes, CPA, CA Davinder Valeri, CPA, CA

Principal
Research, Guidance and Support
CPA Canada
277 Wellington Street West
Toronto ON M5V 3H2
Email: skeyes@cpacanada.ca
Director
Research, Guidance and Support
CPA Canada
277 Wellington Street West
Toronto ON M5V 3H2
Email: dvaleri@cpacanada.ca
 3

SECTION 1

Overview of Climate
Change Mitigation

Intended Audience and Scope

This publication is intended to be used by:
• CPAs working in industry (operational, management accounting
and reporting roles)
• CPAs and business professionals in leadership roles
• boards of directors

This paper addresses the issue of managing the reduction of GHG emissions
(also known as climate change mitigation). While adapting to the impacts of
climate change is a significant and costly business issue, the focus of this paper
is on the need to reduce and manage GHG emissions in order to avoid costlier
impacts in the future and the associated roles for CPAs.

Overview of Climate Change Adaptation

Severe weather events such as floods, wildfires, heat waves, droughts, and hurricanes have
become more common in recent years. As a result, we are already experiencing the costs
associated with climate change.
A June 2017 report published by the International Institute for Sustainable Development
(IISD) states that “the cost of climate change-related heat waves in Canada is estimated
to have been $1.6 billion in 2015.” According to the Insurance Bureau of Canada, “severe
weather due to climate change is already costing Canadians billions of dollars annually.”
The year 2016 saw a record $4.9 billion of insured losses.1 According to the U.S. National
Oceanic and Atmospheric Administration (NOAA), 2017 was the costliest U.S. disaster year
on record, with total damages of $306 billion. There were over 16 events exceeding $1 billion
2
in damages; the majority of the damage came from hurricanes.
It is important to note that, because impacts vary regionally, businesses and governments
need to tailor their responses to each unique circumstance.
(www.cpacanada.ca/climatechange)

1 www.ibc.ca/nb/resources/media-centre/media-releases/severe-weather-natural-disasters-cause-record
-year-for-insurable-damage-in-canada
2 www.washingtonpost.com/amphtml/news/energy-environment/wp/2018/01/08/hurricanes-wildfires
-made-2017-the-most-costly-u-s-disaster-year-on-record/?noredirect=on
4 A Primer for CPAs on Greenhouse Gas Emissions Management Systems

What Is Climate Change?

Environment and Climate Change Canada defines climate change as “a long-term
shift in weather conditions. It is measured by changes in a variety of climate
indicators (e.g., temperature, precipitation, wind) including both changes in
average and extreme conditions. Climate change can be the result of natural
processes and/or human activity.”3

“Ninety-seven per cent of climate scientists agree that climate-warming trends

over the past century are very likely due to human activities and most of the
leading scientific organizations worldwide have issued public statements
endorsing this position.”4 Scientific evidence has also shown that the period
from 2015-2017 was the hottest three years on record in terms of the earth’s
temperature.5 NASA reported that 2017 was the warmest year on record with-
out an El Nino.6

Government Responses

United Nations Framework Convention on Climate Change

(UNFCCC)
The UNFCCC was adopted in 1992, came into force in 1994, and underpins the
international climate negotiations and global agreements.7 There are 197 Parties
(countries) to the UNFCCC. The UNFCCC’s objective is to “stabilize greenhouse
gas concentrations in the atmosphere at a level that would prevent dangerous
anthropogenic interference with the climate system.”8

Since the UNFCCC was established, a number of climate-change agreements

have been developed, including the Kyoto Protocol and the Copenhagen Accord.
The latest agreement and the one currently in force is the Paris Agreement.

3 www.canada.ca/en/environment-climate-change/services/climate-change/facts.html
4 https://climate.nasa.gov/scientific-consensus
5 www.nytimes.com/2017/01/18/science/earth-highest-temperature-record.html & www.theguardian.com/
environment/2017/nov/06/2017-set-to-be-one-of-top-three-hottest-years-on-record
6 www.accuweather.com/en/weather-news/nasa-reported-2017-was-the-warmest-year-on-record-without
-an-el-nino/70003912
7 http://unfccc.int/parties_and_observers/items/2704.php
8 https://unfccc.int/resource/docs/convkp/conveng.pdf
 SECTION 1 | Overview of Climate Change Mitigation 5

Paris Agreement
On December 12, 2015, 197 Parties to the UNFCCC, including Canada, adopted
the Paris Agreement at the 21st Conference of the Parties (COP21).9 The Paris
Agreement established a consensus to limit the growth of GHG emissions glob-
ally to less than 2° Celsius above pre-industrial levels by 2050 and towards
1.5° Celsius in the latter half of the century.10

The Paris Agreement is the culmination of years of work by governments, busi-

nesses and civil society on a sub-national, national and international basis. The
difference between the Paris Agreement and previous UNFCCC Accords is that
the Paris targets were negotiated based upon Intended Nationally Determined
Contributions (INDCs) developed by individual countries and submitted prior
to the Paris negotiations. INDCs were developed with input from stakeholders
including business and industry, cities, provinces and states and other stakehold-
ers. The Paris Agreement entered into force November 4, 2016, and at the time
of this publication, 174 of 197 Parties had ratified the Paris Agreement, includ-
ing Canada.11

“This monumental agreement by the world’s governments in Paris marks a critical turning
point for the global economy. The deal is an unequivocal signal to investors to shift trillions
of dollars of capital to low-carbon solutions and to companies, in their turn, to invest in
developing and scaling up clean technologies. Those that do will surely be the winners in
the now inevitable transition to a low-carbon economy.”
Paul Simpson — CEO, Carbon Disclosure Project

Since the entry into force of the Paris Agreement, some challenges have arisen
which could impact its potential for success, notably:
• the stated intention of the U.S. to withdraw from the Paris Agreement
(However, the withdrawal of the U.S. at the national level, has led to signifi-
cantly increased activity at the city, state and regional levels as well as from
the private sector.)
• there is a gap between the current commitments by governments and
the stated goal of limiting average global warming to 2° Celsius

9 http://unfccc.int/paris_agreement/items/9444.php
10 http://bigpicture.unfccc.int
11 http://unfccc.int/paris_agreement/items/9485.php
6 A Primer for CPAs on Greenhouse Gas Emissions Management Systems

Implementing the Paris Agreement in Canada

Canada has signed on to the Paris Agreement commitment levels for 2050 and
beyond. In 2017, Canada’s Environmental Commissioner noted, however, that
there is a significant gap between the government of Canada’s stated targets
and its planned programs and actual progress.12

Figure 1 shows both historical and projected GHG emissions in Canada. Fig-
ure 1 also shows that Canada’s GHG emissions trajectory is estimated not to
peak in 2020; it is necessary to peak by this date, however, in order to meet
the Paris Agreement aspirations.

FIGURE 1: CA
CANADA’S
C DOMESTIC EMISSIONS PROJECTIONS IN 2020 AND 2030
(Mt CO2 eq)13

Greenhouse gas emissions

in megatonnes (Mt)

850

747
800
790

750
742

700
697
731

650
720

600

550 Canadian target = 523 Mt

500
2005 2010 2015 2020 2025 2030

High emissions scenario Low emissions scenario

12 www.oag-bvg.gc.ca/internet/English/parl_cesd_201710_00_e_42488.html
13 www.canada.ca/en/environment-climate-change/services/climate-change/publications/2016-greenhouse
-gas-emissions-case.html
 SECTION 1 | Overview of Climate Change Mitigation 7

Pan-Canadian Framework on Clean Growth and Climate Change

Canada’s strategic action plan to achieve the targets committed to under the
Paris Agreement is set out in the Pan-Canadian Framework on Clean Growth
and Climate Change (Framework).14

The Framework features four pillars:

• carbon pricing
• complementary actions to further reduce emissions
• adaptation measures
• actions to accelerate innovation, support clean technology and create jobs15

Broad-based carbon pricing is the foundation of the Framework.

By the end of 2018, all jurisdictions (including those that have not yet signed
onto the Framework16) must have carbon pricing. According to the Framework,
jurisdictions must have instituted one of the following systems:
• an explicit price-based system (i.e., carbon tax) where the explicit price
must be at least:
— $20 per tonne in 2019
— $30 per tonne in 2020
— $40 per tonne in 2021
— $50 per tonne in 2022
• a cap-and-trade system whereby 2030 emissions must be reduced to at
least 30% below 2005 levels and with declining “annual caps to at least
2022 that correspond, at a minimum, to the projected emission reductions
resulting from the carbon price that year in price-based systems.”17

The federal government has indicated that by early 2022 it will review the
comparative effectiveness of the carbon pricing systems.

14 www.canada.ca/content/dam/themes/environment/documents/weather1/20170125-en.pdf
15 Ibid.
16 At the time of writing, only Saskatchewan has not signed on to the Framework.
17 www.canada.ca/en/services/environment/weather/climatechange/pan-canadian-framework.html
8 A Primer for CPAs on Greenhouse Gas Emissions Management Systems

Provincial Responses
Table 1 summarizes the current carbon pricing elements in existing federal and
provincial programs in Canada.18

TABLE 1: EXISTING FEDERAL AND PROVINCIAL CARBON PRICING AND

GHG EMISSIONS REPORTING REQUIREMENTS

Jurisdictional Carbon Pricing and

Target GHG Reporting Requirements19

Federal Carbon Tax: The federal backstop applies in provinces that do

• 30% below 2005
GHG emission levels
by 203020
• 80% below 2005
GHG emission levels
by 205021
not establish a carbon price (tax or cap and trade) by the end
of 2018. The carbon tax will be $20/tCO2e in 2019, increasing
by $10 per year to $50/tCO2e by 2022. 22
Reporting: Annual GHG emissions reporting is mandatory for
facilities emitting greater than 10,000 tCO2e per year. 23

British Columbia24 Carbon Tax: The carbon tax was established in 2008 and is
• 33% below 2007 currently set at $30/tCO2e;25 starting April 1, 2018, it increases
GHG emission levels by $5/tCO2e per year to $50/tCO2e in 2021. 26
by 2020
Reporting: Annual GHG emissions reporting is mandatory for
• 80% below 2007
facilities emitting greater than 10,000 tCO2e per year and
GHG emission levels
facilities that have emitted more than 10,000 tCO2e in any of
by 2050
the previous three years. 27

Alberta28 Carbon Tax: The carbon tax started at $20/tCO2e in 2017

• Cap on annual emis-
sions from oil sands:
100 Mt per year
• Methane Emissions:
45% reduction
by 2025
and increased to $30/tCO2e in 2018.
Large Industrial Emitters: These entities are subject to the
Carbon Competitiveness Incentives (CCI) program as of
January 1, 2018.
Reporting: Annual GHG emissions reporting is mandatory
for facilities emitting greater than 10,000 tCO2e per year. 29

18 At the time of writing, Ontario announced its intention to eliminate the existing cap-and-trade system,
withdraw from the Western Climate Initiative (WCI) and challenge the federal government’s jurisdiction to
impose a national carbon price. However, Ontario still remains a member of the Framework at the time
of writing.
19 Compliance requirements for third-party verification of GHG emissions reports vary by jurisdiction.
For additional information, refer to the relevant government legislation.
20 www4.unfccc.int/submissions/INDC/Published%20Documents/Canada/1/INDC%20-%20Canada%20-%20
English.pdf
21 https://unfccc.int/files/focus/long-term_strategies/application/pdf/canadas_mid-century_long-term_
strategy.pdf
22 Ibid.
23 www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/
facility-reporting.html
24 www2.gov.bc.ca/gov/content/environment/climate-change/planning-and-action/legislation
25 www2.gov.bc.ca/gov/content/environment/climate-change/planning-and-action/carbon-tax
26 www2.gov.bc.ca/gov/content/taxes/tax-changes/budget-changes
27 www2.gov.bc.ca/gov/content/environment/climate-change/industry/reporting
28 www.alberta.ca/climate-leadership-plan.aspx
29 http://aep.alberta.ca/climate-change/guidelines-legislation/specified-gas-reporting-regulation/default.aspx
 SECTION 1 | Overview of Climate Change Mitigation 9

Jurisdictional Carbon Pricing and

Target GHG Reporting Requirements19

Manitoba30 Carbon Tax: A flat price of $25/tCO2e starts in 2018 with no

• 33% below 2005 increases planned. 31
by 2030
Large Industrial Emitters: Output-based pricing is to be intro-
• 50% below 2005
duced in 2019 for facilities emitting greater than 10,000 tCO2e
by 2050
per year. 32
• Carbon neutral
by 2080 Reporting: Annual GHG emissions reporting under federal
system.

Ontario At time of writing, Ontario has announced its intention to elimi-

nate the existing cap and trade program. The program was
introduced January 1, 2017 and had been linked to the Western
Climate Initiative. Ontario has also announced that it intends
to challenge, along with Saskatchewan, the applicability of the
Federal government’s plan to impose a carbon tax on jurisdic-
tions that have not instituted a price on carbon.
Reporting: TBD

33
Quebec Cap and Trade: The cap-and-trade program was established
• 20% below 1990 here in 2013 with mandatory participation for facilities emit-
GHG emission levels ting greater than 25,000 tCO2e per year. A voluntary opt-in
by 2020 provision is available for facilities emitting between 10,000 and
• 37.5% below 1990 25,000 tCO2e per year. The cap-and-trade policy has been
GHG emission levels linked with the Western Climate Initiative since inception. 34
by 2030
Reporting: Annual GHG emissions reporting is mandatory
• 80 to 95% below
for facilities and petroleum producers emitting greater than
1990 GHG emission
10,000 tCO2e per year. 35
levels by 2050

30 www.gov.mb.ca/sd/annual-reports/sdif/mb-climate-change-green-economy-action-plan.pdf
31 www.gov.mb.ca/asset_library/en/climatechange/climategreenplandiscussionpaper.pdf
32 Ibid.
33 www.mddelcc.gouv.qc.ca/changementsclimatiques/engagement-quebec-en.asp
34 www.mddelcc.gouv.qc.ca/changements/carbone/documents-spede/in-brief.pdf
35 www.mddelcc.gouv.qc.ca/air/declar_contaminants/index-en.htm
10 A Primer for CPAs on Greenhouse Gas Emissions Management Systems

Private Sector Role

National and international policy and regulation alone will not achieve the goals
of the Paris Agreement. Actions by the private sector and other non-state enti-
ties will be needed to bridge the gap; this can only be achieved by harnessing
markets, innovation and technology. Achieving the 2° Celsius target itself and
moving towards 1.5° Celsius will require a cultural shift in the world economy
and the way business operates.

It is estimated that from 2020 onward at least $200 billion of public and
$800 billion of private resources in climate action each year is necessary. 36
Much of this spending will come from businesses seeking to achieve competi-
tive advantage in this new economic landscape.

36 www.mission2020.global
 11

SECTION 2

The Need for GHG

Emissions Management

Part of an entity’s competitive advantage may be connected to its ability to

manage GHG emissions. In order to reduce GHG emissions, it is important for
companies to establish appropriate measurement and record-keeping systems
and processes.

Different Types of Greenhouse Gases

There are several types of GHG emissions that contribute to climate change;
seven of these are included in the Paris Agreement (see Table 2). The national
GHG inventories will be used for each country’s reporting against targets estab-
lished in the Paris Agreement.

Some GHGs are more potent and short-lived in the atmosphere; others are
less potent but remain in the atmosphere for a longer period. To simplify emis-
sions reporting by organizations and governments internationally, reporting
protocols require that the global warming potential (GWP) of each GHG be
expressed in tonnes of carbon dioxide equivalents (tCO2e). Determining the
total tCO2e emissions of a reporting entity then becomes a simple matter of
multiplying the tonnes of each gas emitted in a given year by its GWP value.
For example, the impact of reducing one tonne of carbon dioxide would be
measured as a reduction of 1 tCO2e, whereas the reduction of one tonne of
methane would be measured as 25 tCO2e.
12 A Primer for CPAs on Greenhouse Gas Emissions Management Systems

TABLE 2: GHG EMISSIONS INCLUDED IN PARIS AGREEMENT37

Global
Warming Illustrative
GHG Potential Examples
Emission (GWP) of Sources

Carbon Dioxide — CO2 1 fossil fuel combustion (e.g., emissions from

electricity production from coal or gas)

Methane — CH4 25 landfill and animal waste decomposition,

natural gas, oil and coal production

Nitrous Oxides — N2O 298 fertilizers (e.g., used in agriculture), nitric

acid production from manufacturing, etc.,
biomass combustion

Hydrofluorocarbons—HFCs 124 – 14,800 by-products of industrial processes

(e.g., chemical production)

Perfluorocarbons — PFCs 7,390 – 12,200 manufacture of semi-conductors,

refrigeration equipment, aluminum

Sulfur hexafluoride — SF6 22,800 high voltage circuit breakers, switchgear

Nitrogen trifluoride — NF3 17,200 manufacture of semiconductors and LCD

panels, certain types of solar panels and
chemical lasers

GHG Emissions Management Systems

A GHG Emissions Management System consists of a set of processes and tools
designed and developed by organizations and tailored to their need to under-
stand, quantify, monitor, report and verify GHG emissions. This section explores
key components of GHG Emissions Management Systems and provides key
information for CPAs and businesses seeking to reduce GHG emissions.

37 www.epa.gov/ghgemissions/overview-greenhouse-gases
 SECTION 2 | The Need for GHG Emissions Management 13

Overview of GHG Reporting Frameworks

The table below provides a summary of the two most commonly used frame-
works for GHG emissions reporting: ISO 14064 and the GHG Protocol. For
additional information, refer to Appendix A.

TABLE 3: GHG EMISSIONS MANAGEMENT STANDARDS AND PROTOCOLS

Standard /
Protocol Description and Use Cases

ISO 14064 The International Standards Organizations (ISO) Greenhouse Gas Stan-
dard 14064 (ISO 14064: Parts 1, 2 and 3) is globally recognized and widely
accepted and used across the private and public sectors for measuring,
reporting and managing GHG emissions. It was developed and initially
released in 2006 as a globally applicable standard. There are three parts
to ISO 14064:
• Part 1: Specification with guidance at the organizational level for
quantification and reporting of greenhouse gas emissions and
removals: requirements for the design, development, management,
38
reporting and verification of an organization’s GHG inventory.
• Part 2: Specification with guidance at the project level for quantifica-
tion, monitoring and reporting of greenhouse gas emission reductions
or removal enhancements: requirements for planning a GHG project,
identifying and selecting GHG sources, sinks and reservoirs, develop-
ing a baseline scenario, monitoring, quantifying, documenting and
reporting GHG project performance. 39
• Part 3: Specification with guidance for the validation and verification
of GHG assertions: requirements for verifying an organization’s GHG
inventory (under ISO 14064-1) and GHG project quantification (under
ISO 14064-2).40

GHG Protocol The World Resources Institute (WRI) and the World Business Council for
Sustainable Development (WBCSD) jointly developed the GHG Protocol
in 2001. The GHG Protocol establishes comprehensive global standardized
frameworks to measure and manage GHG emissions from private and
public sector operations, value chains and mitigation actions.41
The GHG Protocol has developed seven separate GHG Standards,
including:42
• Corporate Accounting and Reporting Standard
• GHG Protocol for Cities
• Mitigation Goal Standard
• Corporate Value Chain (Scope 3) Standard
• Policy and Action Standard
• Product Standard
• GHG Project Protocol

38 www.iso.org/standard/38381.html
39 www.iso.org/standard/38382.html
40 www.iso.org/standard/38700.html
41 www.ghgprotocol.org/about-us
42 www.ghgprotocol.org/standards
14 A Primer for CPAs on Greenhouse Gas Emissions Management Systems

Key Components of a GHG Emissions

Management System
The development and implementation of a robust GHG Emissions Management
System is a key part of managing climate-related risks and opportunities and
integrating them into business decision-making and reporting processes. It is
important to note that while GHG Emissions Management Systems are typically
tailored to the industry, process and/or supply chain relevant for organizations,
there are standard components that should be considered by all companies
implementing such a system.

The following questions provide guidance for evaluating an organization’s

unique requirements for a suitable GHG Emissions Management System:

1. What are the relevant regulatory requirements for GHG emissions reporting?
In order to determine reporting obligations, a jurisdictional scan of exist-
ing and planned GHG emissions reporting regulation is a prudent first
step. It is worthwhile noting that GHG emissions reporting regulations
vary significantly within Canada; each province and territory may have its
own approach. Companies should understand the policies in all jurisdic-
tions where they have operating facilities, not only the jurisdiction where
head office is located.

2. Is participation in a GHG emissions reporting program mandatory

or voluntary?
Most GHG emissions regulations specify a GHG emissions threshold for
mandatory participation. A summary of the relevant thresholds can be
found in Table 1. Understanding whether your facilities are required to
submit annual reports to different levels of government is an essential step
early in the process. In order to make this assessment, the organization may
need to complete a GHG emissions inventory to determine whether facili-
ties currently exceed, or are expected to exceed, regulatory thresholds.

3. What GHG emissions reporting framework is applicable?

In many cases, the GHG emissions regulation will specify the requirements
for reporting. The framework utilized to produce GHG emissions reports
will dictate the systems, processes and controls in place to ensure reliable,
accurate and timely data. Refer to Table 3 for information on two of the
most widely used GHG emissions standards and protocols.

4. Is third-party verification required for GHG emissions reports?

Many, but not all, regulations require organizations to have their GHG emis-
sions reports verified annually by an independent third party. In evaluating
the applicable requirements, it is important to understand the frequency
 SECTION 2 | The Need for GHG Emissions Management 15

and level of assurance required for GHG emissions reports. In addition, it is

important to understand whether the lead verifier is required to be certified
(e.g., ISO 14064-3) or whether the verification body as a whole must be
certified under the regulation (e.g., ISO 14065). This will impact the selection
of a third-party verifier.

5. What types of GHG emissions are relevant for my industry

and/or business?
As noted in Table 2, GHG emissions reporting entails measuring and
managing the seven relevant greenhouse gases. Some gases are more
important to specific industries than others. Industry associations (e.g.,
Mining Association of Canada’s Energy and GHG Emissions Management
Reference Guide), UNFCCC, and multilateral agencies (e.g., International
Energy Agency, World Resources Institute, and World Business Council for
Sustainable Development) all provide technical guidance and additional
information as appropriate. Refer to Appendix A for resources.

6. What is the appropriate scope and boundaries for GHG emissions

reporting?
GHG emissions reports can include Scope 1, 2 or 3 emissions. According to
the GHG Protocol definitions, Scope 1 emissions are defined as direct GHG
emissions from operations (e.g., emissions associated with operating facili-
ties); Scope 2 emissions are defined as indirect GHG emissions from energy
usage (e.g., emissions associated with electricity use); and, Scope 3 emis-
sions are defined as other indirect GHG emissions from business activities
(e.g., emissions associated with employee travel). Depending upon the
objectives and regulatory requirements for GHG emissions reporting,
organizations will need to consider what facilities, processes and business
activities will be scoped into the GHG Emissions Management System.

7. Will the organization set targets for GHG emissions reductions?

A critical starting point is completion of a baseline GHG emissions inventory
in order to evaluate the current GHG emissions profile of the organization
and its facilities. The baseline will be used to measure progress toward
goals over time. From there, a company must determine whether it will set
targets for reducing GHG emissions in the context of business strategy,
regulatory compliance and reporting requirements. In setting targets for
GHG emission reductions, many organizations including Nike, Walmart and
HP are utilizing science-based targets that align with the 2° Celsius thresh-
old defined in the Paris Agreement (refer to Appendix A for resources).
16 A Primer for CPAs on Greenhouse Gas Emissions Management Systems

8. What is the organization’s strategy for managing GHG emissions?

In managing GHG emissions, the organization needs to define its strategy
for mitigating risks and capitalizing on opportunities. An essential part of
the strategy includes setting objectives for GHG emissions management in
line with existing business strategy and risk management processes. The
organization should create an action plan that includes key performance
indicators, milestones, monitoring and regular progress reviews in order
to meet stated objectives. In addition, roles and responsibilities across the
organization must be clearly defined and aligned with specific actions
outlined in the plan. Systems, processes and internal controls should be
designed and implemented to ensure the accuracy, consistency, com-
parability and reliability of GHG emissions data collected for reporting
purposes.

9. What is the role of leadership in GHG emissions management?

The importance of leadership by executive management and oversight
by the board of directors cannot be understated. The “tone at the top”
articulates the importance of integrating GHG emissions management with
existing risk management, strategy and operations. In this context, GHG
emissions reports may be used for internal or external audiences.

10. Is external disclosure to capital providers necessary?

As demonstrated throughout this paper, companies may be required
to report GHG emissions to various levels of government. Beyond that,
an entity should evaluate whether there is a need or benefit to reporting
GHG emissions and/or related information to other external stakeholders.
For example, many companies may choose to respond voluntarily to inves-
tor requests for further GHG emissions information via CDP surveys.43 In
addition, if assessed as financially material, listed companies must include
GHG emissions information in financial filings.44 While this paper does not
address the issue of financial reporting related to GHG emissions, some
useful resources are provided in Appendix A.

43 CDP (formerly the Carbon Disclosure Project) is an international not-for-profit organization providing
a global system for companies and cities to measure, manage and share environmental information.
44 In Canada, listed companies must disclose material information, including material climate change informa-
tion, in their securities regulatory filings. Further guidance can be found in CSA 51-333: Environmental
Reporting Guidance: www.osc.gov.on.ca/documents/en/Securities-Category5/csa_20101027_51-333_
environmental-reporting.pdf.
 17

SECTION 3

Roles for CPAs

An organization’s GHG emissions profile can have implications for business

strategy, risk management, financial and operational performance, and long-term
value creation. In responding to GHG emissions and the associated organizational
risks, CPAs have an opportunity to play a critical role by acting as a hub within
the organization, bringing together multi-disciplinary teams to take collaborative
action.

Similar to any complex organizational challenge, GHG emissions manage-

ment programs require diverse skills. Consistent with the approach taken in
other multifaceted areas, such as insurance liabilities and infrastructure invest-
ment, CPAs will need to engage with engineers, sustainability professionals,
climate scientists and others to respond effectively to these unique risks and
opportunities.

The table below outlines appropriate roles for CPAs in GHG emissions manage-
ment activities. These roles illustrate some of the ways CPAs can support their
organizations as they mitigate GHG emissions.
18 A Primer for CPAs on Greenhouse Gas Emissions Management Systems

TABLE 4: ROLES FOR CPAs IN CLIMATE-CHANGE MITIGATION

Climate-Change Mitigation Stage

Respond to
Roles for Motivate Plan Implement Assess
Market and
CPAs Action Action Action Performance
Stakeholders
CPAs in Examples:
Leadership • Ensure board is educated about GHG emissions management.
Positions • Comment on policy alternatives.
• Integrate GHG emissions mitigation considerations into organizational strategy,
risk management and decision-making.
• Set GHG emissions reduction targets and develop organization-wide action plans.
• Establish accountability structures for mitigation goals and targets.
• Embed GHG mitigation into business functions and processes, including compensation.

Roles for Examples: Examples: Examples: Examples: Examples:

CPAs at all • Identify GHG • Support • Participate • Establish key • Contribute to
levels mitigation develop- in carbon performance external GHG
risks and ment of GHG markets trad- indicators emissions
opportunities. emissions ing and (KPIs) for reporting
• Develop busi- reduction appropriate mitigation (government,
ness case for targets and accounting for targets. financial and
45
GHG mitigation action plans. transactions. • Establish voluntary).
actions based • Estimate • Track ROI on systems and • Contribute to
on regulatory costs and GHG emission internal con- internal GHG
environment benefits of reduction trols over GHG emissions
and stake- GHG mitiga- investments emissions data reporting.
holder input. tion activities. and compare and KPIs. • Engage
• Evaluate to plan. • Measure third-party
impact of impacts of assurance
carbon pric- GHG emissions providers for
ing on capital on assets, GHG emissions
expenditure liabilities, data, systems
decisions. revenue and and reports.
expenses.
• Perform
internal audit
of GHG emis-
sions data,
systems and
reports.

45 For additional guidance on accounting for cap-and-trade transactions, refer to Appendix A.

 SECTION 3 | Roles for CPAs 19

“Accountants in business play a critical role in supporting their organizations in respond-

ing to climate change and its impacts. First and foremost, they can help make the case
for climate action by framing climate change opportunities and risks in a business context.
Connecting this Goal to business objectives and long-term business resilience is important
in gaining wide-spread support and ensuring business sustainability.
The objective performance data and insights accountants in business can provide should
include material climate change issues and help establish and monitor appropriate targets
and goals for emissions management and abatement. Their reporting and communication
skills can be applied to developing enhanced forms of reporting, such as environmental
profit and loss statements and integrated and sustainability reporting, which provide
insights to investors, employees, and other stakeholders on an organization’s climate
change performance.”46
International Federation of Accountants (IFAC): 2030 Agenda for Sustainable Develop -
ment — A Snapshot of the Accountancy Profession’s Contribution

Roles for CPAs in Leadership Positions

CPAs in leadership positions have roles that span all stages of climate change
mitigation. Working collaboratively with other members of the management
team and other subject matter experts, chief financial officers (CFOs) can build
climate-change goals into overall business strategy, risk management and
operational decision-making. CFOs often have an expansive view of the entire
organization. They can lead an integrated response to mitigation issues by sup-
porting the establishment of company-wide GHG emission-reduction targets.

This includes the development of mitigation action plans with key performance
indicators to assess performance against goals. CPAs in leadership roles can
also embed mitigation considerations into existing business processes, such as
enterprise risk management systems, financial and operational reporting systems,
asset management, supply chain management, and procurement policies, to
name a few.

“CPAs in leadership positions, such as the CFO, have an opportunity to set the tone for
the organization when it comes to investing in climate change mitigation and adaptation
actions. As accountants, we are uniquely positioned to lead the business case for GHG
emissions management activities. We bring the skills and rigor required to ensure that
investments to reduce GHG emissions align with overall risk management and strategy.”
Robert Siddall — FCPA, FCA, Chief Financial Officer of Metrolinx

46 www.cpacanada.ca/en/business-and-accounting-resources/financial-and-non-financial-reporting/
sustainability-environmental-and-social-reporting/publications/the-2030-agenda-for-sustainable
-development
20 A Primer for CPAs on Greenhouse Gas Emissions Management Systems

Roles for CPAs at All Levels

The roles for CPAs across all stages of mitigation demonstrate that the enabling
and technical CPA competencies can be applied in a new subject matter area.
Accountants already have the skills and expertise to add value to their organi-
zation’s climate-change mitigation efforts.

Motivate Action
As a starting point, most organizations will seek to understand their GHG
emissions inventory, also known as a carbon footprint, and evaluate whether
government reporting is required and whether reductions are necessary for
compliance purposes and/or advisable in the context of their business model
and strategy. CPAs can help to identify mitigation risks and opportunities and
build the business case for reducing GHG emissions by developing quantita-
tive and qualitative analyses to support decision-making. CPAs in leadership
roles can identify and analyze business drivers for GHG emissions manage-
ment, such as a changing regulatory environment and evolving stakeholder
expectations.

Plan Action
In evaluating responses to identified risks and opportunities, CPAs can support
their organizations in estimating the costs and benefits of mitigation options
and prioritizing activities to achieve high-impact emissions reductions. CPAs
can also support the development of GHG emission reduction targets by using
scenario modelling to forecast financial and operational outcomes of alternate
mitigation actions.

Implement Action
CPAs may be engaged in carbon markets as part of trading and compliance
activities related to cap-and-trade systems. This could include accounting for
assets, liabilities, revenue and expenses associated with cap-and-trade transac-
tions. For additional information on this topic, refer to a recent CPA Canada
publication titled Accounting for Cap and Trade Systems in Appendix A.

Assess Performance
Measurement is an essential tool for evaluating progress toward GHG emission-
reduction targets and reporting externally to the market and stakeholders.
CPAs working in business are well positioned to help their organizations with
performance measurement and management of mitigation efforts. Accoun-
tants can play a critical role by establishing key performance indicators for
 SECTION 3 | Roles for CPAs 21

mitigation action plans used for internal decision-making and external com-
munications. CPAs can support the design and implementation of systems and
internal controls for collecting and validating GHG emissions data.

Respond to Market and Stakeholders

CPAs in reporting roles may be involved with mandatory and voluntary report-
ing on GHG emissions. Mandatory reporting includes GHG emissions reporting
to federal, provincial and territorial governments. If the organization is publicly
listed, CPAs may also be involved with mandatory reporting on material climate
change information in regulatory filings. Voluntary reporting includes respond-
ing to surveys, such as the CDP and developing standalone sustainability
reports intended for a broader audience beyond investors.
 23

Conclusion

For Canadian companies to meet regulatory requirements and succeed in the

transition to a low-carbon economy, it is important to measure, manage and
report on GHG emissions. An effective GHG Emissions Management System
is imperative. CPAs play an important role in motivating, planning and imple-
menting action, assessing performance and reporting to stakeholders.
 25

Appendix A—Where to
Find More Information

This appendix provides useful resources in relation to the issue of GHG emissions
management and reporting.

CPA Canada Publications

• Accounting for Cap and Trade Systems: www.cpacanada.ca/en/
business-and-accounting-resources/financial-and-non-financial
-reporting/international-financial-reporting-standards-ifrs/publications/
accounting-for-cap-and-trade-transactions

• Study of Climate-Related Disclosures by Canadian Public Companies:

www.cpacanada.ca/en/business-and-accounting-resources/financial-and
-non-financial-reporting/sustainability-environmental-and-social
-reporting/publications/climate-related-disclosure-study

• Climate Change Briefing: Questions Directors Should Ask: www.cpacanada.ca/

climatechangebriefing

GHG Emissions Management and Reporting Resources

• ISO 14064-1: www.iso.org/standard/38381.html

• ISO 14064-2: www.iso.org/standard/38382.html

• ISO 14064-3: www.iso.org/standard/38700.html

• ISO 14065: www.iso.org/standard/60168.html

26 A Primer for CPAs on Greenhouse Gas Emissions Management Systems

• Greenhouse Gas Protocol: www.ghgprotocol.org

• Mining Association of Canada — Towards Sustainable Mining — Energy

Use and GHG Protocol: http://mining.ca/towards-sustainable-mining/
protocols-frameworks/energy-and-ghg-emissions-management

• Science-Based Targets Initiative: http://sciencebasedtargets.org/

companies-taking-action

Financial Reporting Resources

• CSA 51-333: www.osc.gov.on.ca/documents/en/Securities-Category5/
csa_20101027_51-333_environmental-reporting.pdf

• CSA Climate Change Disclosure Review: www.securities-administrators.ca/

aboutcsa.aspx?id=1567

• COSO and the World Business Council for Sustainable Develop-

ment (WBCSD) Report on Enterprise Risk Management — Applying
Enterprise Risk Management to Environmental, Social and Gov-
ernance-related Risks (Draft February 2018): www.wbcsd.org/
Projects/Non-financial-Measurement-and-Valuation/Resources/
Applying-enterprise-risk-management

Voluntary Disclosure Initiatives

• Task Force on Climate-related Financial Disclosures (TCFD): www.fsb-tcfd.org

• Sustainability Accounting Standards Board (SASB): www.sasb.org

• Carbon Disclosure Project (CDP): www.cdp.net

• Climate Disclosure Standards Board (CDSB): www.cdsb.net

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